Slide 12-11 Extraordinary Items Material in amount Gains or losses that are both unusual in nature and not expected to recur in the foreseeable future Reported net of related taxes Irwin/McGraw-Hill ?The McGraw-Hill Companies, Inc, 1999
?The McGraw-Hill Companies, Inc., 1999 Slide 12-11 Irwin/McGraw-Hill Material in amount. Gains or losses that are both unusual in nature and not expected to recur in the foreseeable future. Reported net of related taxes. Extraordinary Items
Slide 12-12 Extraordinary Items Example During 2000, Apex Co experienced a loss of $75,000 due to an earthquake at one of its manufacturing plants in Nashville. This was considered an extraordinary item. The company reported income before extraordinary item of $175,000. All gains and losses are subject to a 30% tax rate How would this item appear on the 2000 income statement? Irwin/McGraw-Hill ?The McGraw-Hill Companies, Inc., 1999
?The McGraw-Hill Companies, Inc., 1999 Slide 12-12 Irwin/McGraw-Hill During 2000, Apex Co. experienced a loss of $75,000 due to an earthquake at one of its manufacturing plants in Nashville. This was considered an extraordinary item. The company reported income before extraordinary item of $175,000. All gains and losses are subject to a 30% tax rate. How would this item appear on the 2000 income statement? Extraordinary Items Example
Slide 12-13 Extraordinary Items Example Extraordinary Loss $(75,000) Less: Tax Benefits ($75,000?30% 22,500 Net loss $(52,500 Irwin/McGraw-Hill ?The McGraw-Hill Companies, Inc., 1999
?The McGraw-Hill Companies, Inc., 1999 Slide 12-13 Irwin/McGraw-Hill Extraordinary Items Example Extraordinary Loss $ (75,000) Less: Tax Benefits ($75,000 ? 30%) 22,500 Net Loss $ (52,500)
Slide 12-14 Extraordinary Items Example Extraordinary Loss $(75,000) Less: Tax Benefits ($75,000?30% 2 500 Net loss $(52,500) Income Statement Presentation: Earnings before extraordinary iten 175,000 Extraordinary Loss Earthquake loss (net of tax benefit of $22, 500 (52,500) Earnings before cumulative effect of a change in accounting principle 122, 500 Irwin
?The McGraw-Hill Companies, Inc., 1999 Slide 12-14 Irwin/McGraw-Hill Extraordinary Loss $ (75,000) Less: Tax Benefits ($75,000 ? 30%) 22,500 Net Loss $ (52,500) Earnings before extraordinary item $ 175,000 Extraordinary Loss: Earthquake loss (net of tax benefit of $22,500) (52,500) Earnings before cumulative effect of a change in accounting principle $ 122,500 Income Statement Presentation: Extraordinary Items Example